Keep Them Coming Back: How User Experience Can Boost Your Fintech's Retention Rates

Everyone would love to have higher user retention rates for digital products. Within one month of downloading a mobile app, retention rates are only about 40%, and by month three, they drop to around 30%.

To keep high indicators, you need to create a product that offers real value with ease. This approach will help you retain loyal users and earn long-term subscriptions, renewals, and referrals. To improve user retention, you must know how to measure your retention rate and implement effective strategies, so in this blog I will help you dive deeper into this topic and learn the basics.

What is User Retention?

User retention is a metric for any digital product or service. It measures the number of users who continue to use your product over a specific period of time, such as a week, month, or quarter. To calculate user retention, you need to choose a defined period and focus on your entire product or features. For example, if you run a mobile app, you can measure user retention rates by the number of logins or the number of users who interacted with a particular feature during the chosen time frame.

With user retention, you can gain insights into how well your product is performing and identify areas for improvement. A high retention rate indicates that your product is delivering value to users. On the other hand, a low retention rate signals that users are not finding your product valuable or that they are encountering issues that need to be addressed.

Take note that user retention definition is not the same as customer retention or churn. Customer retention refers to the percentage of customers who continue to do business with you over a given period, while churn is the rate at which customers stop doing business with you. User retention is still focused specifically on the number of users who continue to use your product, regardless of whether they are paying customers or not.

Importance of User Retention in Fintech Industry

Bain & Company’s data indicates that boosting user retention by 5% can result in a 25% increase in profits, making retention more cost-effective than acquiring new customers. To retain customers, it’s crucial to make them feel heard and catered to. A positive customer experience can significantly influence a customer’s decision to stick with one product over another.

When customers feel loyal to your brand, they are more likely to forgive minor mistakes and continue to support your business. Additionally, they can become brand advocates who recommend your products or services to others through word-of-mouth.

Retained users not only provide valuable feedback on your company’s product or service but also help identify areas for improvement. By listening to customer feedback and incorporating it into product development, companies can better align their offerings with their customers’ needs. Ultimately, this can lead to increased customer satisfaction and loyalty.

How User Experience Impacts User Retention

Lack of usability is one of the primary reasons why many businesses fail. When users have a poor experience, they tend to abandon websites around 90% of the time. In the case of mobile apps, users are five times more likely to abandon purchases if the app doesn’t respond well.

On the other hand, a well-designed UX can significantly increase conversion rates by up to 400%. By offering a strategic and thoughtful UX, businesses can enhance the customer experience, which can lead to improved customer retention and higher conversion rates.

The UX team is responsible for designing the features, content, and user interaction of a banking app or website. They conduct research on how users navigate the platform with the aim of creating an intuitive and easily accessible financial product.

Check out another article of mine about how to boost your app UX at the DashDevs’ site.

3 Phases of User Retention

As a mobile marketer, project manager, or any other person responsible for the product, your goal is to keep users engaged throughout their entire journey, starting from the moment they download your app. It is important to understand each stage of their journey to ensure their ongoing engagement with the application.

Phase 1: The Onboarding Stage

Although all retention phases are significant, they carry different weights. The first retention phase is the most important, as it sets the tone for the rest.

If a user drops off during this phase, it’s challenging to recover in the later stages. The first impression of your app and brand is formed during this phase, making it vital for all the following processes.

The ultimate goal for new users is to understand the app’s value as soon as they download it, but there are many factors that can lead to a poor experience.

• Users who download and launch your app may end up being discouraged by a lengthy onboarding process, and may not return.
• They might explore the app but not utilize the features that are essential to core users.
• They could even use the app a few times before deciding that it’s not worth keeping and uninstalling it.

To ensure users return, it’s crucial to provide them with an immediate, simple, and engaging experience that showcases your app’s unique value.

Example: Acorns is a fintech app with a simple and effective onboarding process. Users are guided through a quick and easy setup that includes linking their bank account and selecting their investment strategy.

The app offers personalized investment portfolios and also features an intuitive interface that enables users to monitor their account, view their investments, and track their progress towards their financial goals. As you can see, the onboarding process is simple and engaging for such a complicated application, making it easy for new users to get started with investing.

Phase 2: The Nurture Stage

Many teams assume that a successful initial experience will automatically lead to success in the next phase. However, the excitement of the first experience will eventually wear off. In the nurture phase, the focus should be on building user habits by creating a repetitive experience. This will help users form new habits around the app and keep coming back on their own.

Example: The Robinhood app uses a combination of personalized notifications, educational content, and gamification to encourage users to keep investing regularly.

Users receive push notifications to remind them to invest daily, and Robinhood rewards those who invest consistently with a free stock through its referral program. The app also provides educational content, such as articles and videos, to help users improve their investing knowledge and confidence.

Through these tactics, Robinhood creates a sense of community and encourages users to make investing a daily habit, ultimately leading to better financial outcomes.

Phase 3: The Attrition Stage

The initial phases of user retention primarily concentrate on onboarding and the psychology of behavior, while the ultimate phase is centered on user feedback and preserving a high-quality product. You can’t become complacent, though. Your task is not only to keep enhancing users’ perceptions of your app as indispensable, but also to maintain their trust.

This requires you to ensure that your app is bug-free to avoid compromising users’ sense of security. Additionally, you need to gain a deeper understanding of your customers by analyzing their behavioral data and heeding customer feedback.

Example: Credit Karma—the app regularly updates users’ credit scores and provides personalized recommendations to help improve their financial health. Credit Karma also uses machine learning algorithms to predict what credit cards and loans users are most likely to be approved for, helping them find the best financial products for their needs.

By providing users with relevant and actionable information, Credit Karma has built a loyal user base that trusts and relies on the app for their financial needs.

How to Enhance User Retention?

To achieve a higher app user retention rate, you should create a product that provides value and is user-friendly. My first and greatest advice to you is to demonstrate to users the product’s worth as quickly as possible.

#1 Simplify the Onboarding Experience

The goal of customer onboarding is to make users feel well-informed about your product without overwhelming them. A simple and informative process provides a positive first impression and helps retain engaged users.

To have a successful onboarding experience, try the following.

#2 Utilize Cohort Analysis to Grasp your App’s Worth

If you want to compare the behavior of different groups of users, like those who signed up on different dates or have different demographics, you can use cohort analysis. By looking at the retention rates of these cohorts, you can identify which features and characteristics are most correlated with user engagement and focus on improving them.

There is enough flexibility in how you define your cohorts, but during the process, you should choose specific criteria that are important to your product. This type of analysis helps you understand how user behavior affects retention rates and can guide future product development.

As you notice that users who spend more time in the app are better retained, you should focus on keeping users engaged longer through your development efforts. Additionally, if you find that users who interact with a specific feature tend to stick around, make sure to highlight that aspect of your product in your marketing and onboarding efforts.

There are various user behavior analytics tools available, including Google Analytics, that you can use to conduct a cohort analysis and gain insights into user behavior.

#3 Create a User-Friendly UI

To keep users engaged and improve retention rates, provide a user interface that is easy to use and delivers tangible benefits. If you’re experiencing retention issues, it’s a good idea to evaluate your user interface to ensure it is tailored to meet the needs of your target audience.

Consider auditing UI elements such as:

• Customize the buttons and gestures to fit the capabilities of your target audience.
• Highlight important features without overwhelming users with unnecessary clutter.
• Organize your app to be easily navigable with the fewest steps possible.
• Ensure that your app is responsive and quick, as users are unlikely to remain patient with slow-loading products.

As a product manager, my teams and I generate user flows and construct user journey maps to comprehend how end-users are achieving your predefined goals. Our aim is to gain insight into the user experience and improve it.

If you are experiencing a decrease in user retention and are unsure about which UI feature is causing it, try A/B variant testing. This involves creating multiple versions of different features and serving them to specific segments of your audience. Gather feedback on different UI components and identify which features are popular with your users and which ones are affecting your retention rates negatively.

#4 Utilize Engagement Hooks in Your App

Engagement hooks are triggers within your app. They motivate users to take action and feel rewarded for doing so, ultimately leading to habitual use and increased retention. **Gamification **is one example of an engagement hook that can transform app usage into an enjoyable experience.

Other types of hooks can include the following.

#5 Encourage Users to Use the App Again

Sending users reminders to return to your app can encourage them and help them form the habit of using it regularly. You can achieve this through push notifications or emails, but make sure you don’t inundate users with too many messages.

For the best results, your return prompts should be relevant, personalized, and actionable. Provide a specific call-to-action, such as trying out a new feature or checking out an update. It’s essential that your messages demonstrate their value immediately, or else users may opt to turn off notifications or unsubscribe.

To maximize the effectiveness of your return prompts, target users who have become less engaged with your product and those who have stopped using it altogether. You can also reach out to former users to announce a new product feature or redesign that may interest them.

#6 Collect Input From Both Active and Former Users

To obtain actionable information, ask users directly why they stuck with or left your product.

Incorporate feedback opportunities for active users into the product experience at specific times. You can encourage those who have used your product for less than a month to rate and review it via notifications. After several months of usage, you can remind them to update their reviews.

Churned users are also crucial sources of feedback, as they can highlight your problem areas and provide you with a roadmap to tackle user retention issues. You can also create opportunities to gather feedback from customers who are on their way out. For example, email unsubscribes can include a comment form where customers can explain why they’re opting out.

#7 Leverage Product Analysis to Consistently Enhance your App

To improve your app user retention rates, analyze your product analytics. This can help you identify areas that need improvement. By tracking user behavior and usage trends, you can identify specific features that are impacting your users the most.

Additionally, looking for anomalies, such as sudden spikes in churn after app updates, can help you identify areas that need improvement.

Keep in mind that even small changes can have a big impact on user opinion, so weigh your improvements against your retention rate goals.

#8 Address Technical and UX challenges

Certain actions can cause a rapid decrease in user retention rates, including the following.

When it comes to app usage, people have a low tolerance for malfunctioning features. In such cases, the feedback from churned users is useful in detecting problems early. If you observe an unexplained drop in user retention, perform an audit to verify that your app is working correctly.

#9 Deliver Exceptional Customer Service

When customers feel appreciated and supported, they are more inclined to continue using your product or service.

Trust plays a crucial role in creating long-lasting relationships with customers. When customers receive timely and helpful responses to their inquiries or concerns, they are more likely to trust your company and your product or service.

Customers who receive excellent customer support tend to have higher levels of satisfaction with their overall experience. Those users are more likely to remain loyal to your brand and recommend it to others, as they feel valued and appreciated.

#10 Provide Tailored User Experiences

Tailoring a product or service to a customer’s unique needs, preferences, and behaviors significantly increases the likelihood of continued use. Personalization also increases customer engagement by providing content or features that align with their interests or behaviors.

Moreover, personalization can address pain points or challenges that may lead customers to consider switching to a competitor. Offering customized solutions can enhance customer satisfaction and prevent churn.

Measuring Retention

To calculate the retention rate of your product, it’s important to first define how you plan to measure it. This includes deciding whether to base it on total customers or revenue and whether to measure it on a monthly, quarterly, yearly, or all-time basis.

Once you have determined your measurement method, you can calculate your retention rate using three key numbers:

• The number of customers at the start of the period
• The number of customers at the end of the period
• The number of customers acquired during that period

By plugging these numbers into a simple equation, you can accurately measure your customer retention.

How to calculate user retention? Once you’ve defined your retention metrics, use the following equation to calculate your customer retention rate:

For example, if you started with 140 customers, ended with 185 customers, and acquired 55 during the period, your equation would look like this:

((185 - 55 / 140) x 100 = 92% customer retention rate

Don’t forget that tracking retention rates over time is just as important as measuring them. Understanding that a product has a 30-day retention rate of five percent is more informative when compared to past rates. For instance, if the rate was six percent last month and eight percent the month before, the product team should work to fix the issue. Conversely, if it increased from 4 percent, that’s a reason to be happy.

Wrapping Up

I hope that now you understand that regularly monitoring user retention is essential to understanding the success of your product or service. Keep track of user retention at every stage of the lifecycle to gain insights into customer behavior. Use this information to assess the effectiveness of advertising campaigns and customer acquisition strategies.

I am sure that you have experienced both awesome and bad apps, and you know the importance of having a well-designed and user-friendly app. To ensure that your application is successful and your customers remain loyal, you must hire top-tier engineers who specialize in UI design and UX. At DashDevs, we have the best experts, experience, and technology to turn your fintech app ideas into a polished reality. Contact us today to get started!

FAQ

What are user retention metrics, and why are they important for fintech companies?

User retention metrics are measurements that track how many people continue to use a product or service over time. These metrics are important for fintech companies because they provide insights into customer satisfaction, loyalty, and engagement. By monitoring user retention metrics, fintech companies can identify how to increase user retention and build long-term relationships with their customers.

What are some user retention strategies that fintech companies can use to increase customer loyalty?

Fintech companies can use a variety of strategies to improve user retention, such as personalized user experiences, excellent customer service, and regular updates and improvements to their products or services. By focusing on the needs and preferences of their customers, fintech companies can create a stronger emotional connection with their user base, foster loyalty over time, and find out how to improve user retention.

How to use a cohort analysis to measure user retention?

Cohort analysis is a technique that allows fintech companies to group users based on a shared characteristic or behavior, such as their acquisition date. By tracking the retention rates of these cohorts over time, fintech companies can identify patterns and trends in user behavior and make data-driven decisions about how to improve their user experience and increase retention.

What is the average user retention rate for apps, and how can fintech companies calculate their own retention rate?

The average user retention rate for apps varies widely depending on the industry and type of app. However, studies have shown that the average retention rate for apps after 90 days is around 20%. Fintech companies can calculate their own retention rate by dividing the number of users who continue to use their product or service over a given period by the number of users who started using the product or service during that same period.

How can fintech companies use Google Analytics to track user retention and engagement?

Fintech companies can use Google Analytics to track user behavior on their website or app, including how long users spend on the site, which pages they visit, and how frequently they return. By setting up custom events and goals in Google Analytics, fintech companies can measure user engagement and retention over time and identify opportunities to improve the user experience.